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The before-tax income for Tamarisk Co. for 2017 was $107,000 and $70,100 for 2018. However, the accountant noted that the following errors had been made:
The before-tax income for Tamarisk Co. for 2017 was $107,000 and $70,100 for 2018. However, the accountant noted that the following errors had been made:
1. | Sales for 2017 included amounts of $37,100 which had been received in cash during 2017, but for which the related products were delivered in 2018. Title did not pass to the purchaser until 2018. | |
2. | The inventory on December 31, 2017, was understated by $8,700. | |
3. | The bookkeeper in recording interest expense for both 2017 and 2018 on bonds payable made the following entry on an annual basis. |
Interest Expense | 16,200 | |
Cash | 16,200 |
The bonds have a face value of $270,000 and pay a stated interest rate of 6%. They were issued at a discount of $15,000 on January 1, 2017, to yield an effective-interest rate of 7%. (Assume that the effective-yield method should be used.) |
4. | Ordinary repairs to equipment had been erroneously charged to the Equipment account during 2017 and 2018. Repairs in the amount of $9,200 in 2017 and $10,200 in 2018 were so charged. The company applies a rate of 10% to the balance in the Equipment account at the end of the year in its determination of depreciation charges. |
Prepare a schedule showing the determination of corrected income before taxes for 2017 and 2018. (Enter negative amounts using either a negative sign preceding the number e.g. -15,000 or parentheses e.g. (15,000). Round answers to 0 decimal places, e.g. 125.)
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